May 1st, 2021

Whether the traditional method of formal adjudication, i.e., the court system will remain effective till civilizations exist? Well, a concrete answer to that question may not be possible but this certainly raises another question that what if this method turns or starts turning obsolete, should there not be an ‘alternative’ to act as an ancillary measure. Indeed, the government had realized the importance of the Alternative Dispute Resolution (hereinafter referred to as “ADR”) mechanisms way before, though the reason preceding its emergence may not be the same as stated above. ADR is a complete body in itself encapsulating different methods that have similar procedures for disposing cases without the involvement of the court. Mediation is one such method whereby negotiation is facilitated between the disputants to reach a mutually-consensual settlement. The scope of mediation has been widened by its inclusion in the new Consumer Protection Act of 2019 (hereinafter referred to as “the Act”), but the Act has also opened the back-door to welcome new issues and challenges. This blog possesses a tunnel-minded vision to bring to the forefront such hurdles and obstacles in the growth of mediation through this Act.

A Much Early Step: Mediation

The parliamentarians have certainly come up with an idea to redress the consumer disputes in a more effective and efficient manner but, at the same time, the same is susceptible to various challenges which may have not come out to the forefront due to the short span of time that has elapsed since the date of enactment, i.e., 2019. Some of the issues and challenges to mediation under the Act, which may arise in the future, are listed below.

• Jurisdictional Ambiguity

Section 37 of the Act provides that where a matter has come before the District Commission, it can ask the parties to give their consent in writing within five days for the matter to be referred to mediation. Now, the challenges that arise here are firstly, the complainant has to approach the District Commission and then only his matter could be referred for mediation, and it should also be noted that approaching the District Commission does not necessarily mean that matter will be referred to mediation as the discretion lies with the District Commission. Secondly, according to Section 34 of the Act, the jurisdiction of the District Commission will be invoked with regards to the place where either the opposite party resides or carries business or where cause of action has arisen or the complainant resides or works for gain. This creates an issue for the complainant as if he approaches the Commission having jurisdiction over his place of residence and the defendant resides or carries business in a place far from the place of such Commission, then it will create a sense of tension between the parties even before the beginning of the mediation proceedings and the same could directly hamper the settlement. For instance, where the defendant has to travel from a far-off place in order to attend the mediation proceedings for which he may have had to incur various expenses relating to transportation and accommodation, then this may, consequently, frustrate him and lead him not to negotiate on any issue, thereby turning the object of mediation futile. Also, ODR mechanism may not be relied in many cases as it is a completely new initiative with alongside digital challenges such as lack of accessibility, understanding and a well-codified legislation or notification of its use, and that it can only be used when both the parties are equally compatible with respect to its application.

• Unscrupulous Outcomes

It is largely expected that mediation will lead to desired results as it brings the parties to the same table for the purposes of settlement but such may not always be the case. In the recent past, in the case of Baglekar Akash Kumar v. More Megastore Retail Ltd.,^[1] wherein the megastore was charging Rs. 3 for carry bags which bears the logo of the store and the same was contended to be an unfair trade practice under the Act. The store was using the consumers as their advertising agents and, over the top, they were also charging them as well to purchase the said bags. The DCDRC held that the defendant must pay Rs. 15,000 to the complainant as compensation and to sell all the carry bags bearing the logo free of charge and that charge could only be taken for the sale of such carry bags which do not have the store logo affixed upon them. If this case would have been referred for mediation, then would the results have been the same in that scenario? In my opinion, the mediator would have certainly asked the defendant to lessen the rates for the logo-bearing carry bags from Rs. 3 to Rs. 1 / Rs. 2 or to provide the complainant with a lump sum amount in the range of Rs. 5,000 – Rs. 10,000 as compensation. This actually deviates from the actual object of the Act, since, although, the consumer may have been compensated for the immediate wrong so caused to him but the actual unfair trade practice has not stopped and is still continuing in practice in some form or manner.

• Non-demarcated Boundaries

There have been no guidelines regarding the nature and types of cases that could be referred for mediation. In the recent case of Tata Motors Ltd. v. Anonio Paulo Vaz and Another,^[2] wherein the dealer, Vistar Goa sold a 2009 model car under the guise of a 2011 model and the complainant held both the manufacturer as well as the dealer liable for unfair trade practice. However, the Supreme Court finally held that since it was the case on a principal-to-principal basis, the manufacturer cannot be made liable for the fault unless the knowledge regarding the same is proved on his part and thus, only the dealer is liable. Again, if this matter would have come before a mediation cell, most probably, the manufacturer and the dealer would have jointly or severally compensated the complainant or had the repairs made to the car or would have replaced the car. But if we had reached at such a probable decision, then a precedent exempting the manufacturer’s liability in such cases would have not have been propounded, thereby leaving behind the scope for interpretation.

Also, matters which involve substantial amounts of money could not be referred to mediation like property disputes, where there is direct involvement of documents and an equal probability of forging the same. In fact, the recent notification of the Central Government of 2020, whereby Rule 4 (c) states that matters involving fabrication of documents or forgery or fraud or impersonation or coercion shall not be sent for mediation and, though, a property matter might not prima facie involve any such issue but there is a high probability that such an issue might arise at a later stage during the proceedings. Further, as per the notification of NCDRC of 2020, Rule 11 (4) states that the mediator is not bound to follow provisions of CPC and the Indian Evidence Act, 1872, which means that if a document has been produced during the proceedings, it could be deemed to be genuine due to the non-binding requirement of testing its authenticity. This ultimately reduces the scope of mediation as only cases involving petty issues could be sent to mediation, which have their own disadvantages as discussed previously.

• Adoption of Opt-In Model

Under the Act, we have adopted the Opt-In Model which means that it is not an obligation to approach mediation, neither upon the mediator nor the parties, alike the settlement so reached in mediation. This reduces the degree of judicialization in the procedure and negates its importance to a certain extent. As opposed to the Indian Model, Italy and Hong Kong relies on the Opt-Out Model, whereby the disputants have to first exhaust the option of mediation and in case of its failure, the case could be sent for formal adjudication. Also, under Section 12-A of the Commercial Courts Act, 2015, the Opt-Out Model has been provided whereby the parties need to first exhaust the pre-institution mediation and if a settlement is being meted out, it will have the same status as that of an arbitral award under Section 30 of the Arbitration and Conciliation Act, 1996.

Conclusion

In my opinion, mediation under this Act is not suitable to deal with all kinds of consumer disputes. Seeking to the far-reaching implications of mediation under the Act, there is a necessity to frame certain guidelines through an order or notification which shall formulate that firstly, the types of cases that could be referred to mediation along with the requirements for those cases where bulky amounts are involved. Secondly, in order to bring further ease in the alleged jurisdictional issues, rules should be made for the parties, especially the adverse party, to approach a forum which is practicable for such party. Thirdly, the Opt-Out Model shall be adopted for instilling more confidence in mediation. Lastly, the ODR mechanism should be made more reliable by laying down guidelines to that effect in order to make it more widely-known, and more online institutions need to be set up in greater number of cities in order to increase the scope of accessibility.